Hot to Not
In this episode of Talking Real Money, Don and Tom dig into the Washington State pension system’s heavy exposure to private equity, sparked by Jason Zweig’s Wall Street Journal reporting and a Seattle Times investigation. They explain why high fees, opaque valuations, and lack of liquidity make private equity especially dangerous for public retirement funds—and why Washington leads the nation in risk. The conversation expands to compare pension strategies across states, question governance and oversight, and warn retirees about the real-world consequences of excessive risk. Later, the hosts respond to a listener trapped in a high-fee, actively managed portfolio and variable annuity, illustrating how costs and complexity quietly erode wealth. The show wraps with practical retirement guidance inspired by Warren Buffett—simplify and protect—plus a discussion of converting mutual funds to ETFs for greater efficiency.
0:04 Show open, call-in invitation, and setup on private equity
0:32 Jason Zweig’s WSJ reporting on private equity fees and markups
1:25 Washington State pension’s heavy private equity exposure
3:23 Valuation and liquidity problems in private equity
4:35 Breakdown of WA pension assets (private equity + real estate)
5:18 Risks of market downturns and illiquidity
6:25 Who’s overseeing the pension fund and their qualifications
7:06 Concerns for Washington retirees and contributors
8:28 Board “experts” and potential conflicts of interest
9:55 Difficulty exiting private equity investments
11:06 Questioning reported 12.3% returns vs public markets
11:59 Call for political accountability and reform
12:50 Comparison to states using mostly public index funds
13:35 Why private equity suffers most in downturns
14:22 Comparison of pension private equity exposure by state
15:58 Rebalancing and “emperor’s clothes” concern
17:07 Caller Luke reacts to pension risks
18:11 Promotion of RetireMeet and retirement education
19:22 Warren Buffett’s retirement advice: simplify and protect
20:28 Risk reduction and advisor role in retirement
21:26 Fiduciary standards and conflicts of interest
22:55 Emphasis on simple, protective portfolios
23:07 Caller Jane asks about high advisory fees
24:40 Discussion of “active management” risks
26:12 Review of proposed funds and red flags
29:57 Analysis of high-fee, high-turnover portfolio
30:57 Concentration and volatility concerns
32:16 Variable annuity warning signs
33:37 Commission conflicts and surrender charges
33:57 Recommendation to change advisors
34:56 Recap of excessive fees and risks
36:33 Importance of honest warnings vs future losses
37:48 Question on converting Vanguard mutual funds to ETFs
38:52 Advantages of ETFs: cost, tax efficiency, liquidity